The Kentucky Teachers’ Retirement System funding issue is currently being studied by a panel created in June by Gov. Steve Beshear. Information about how you can watch and participate is below.

The 25-member Kentucky Teachers’ Retirement System Funding Work Group, formed after the 2015 General Assembly did not enact a long-term solution for funding teachers’ pensions, is to recommend solutions by Dec. 1.

The governor charged the group with reviewing best practices in other states regarding pension benefits, conducting a comprehensive review of funding options and making recommendations for improving the fiscal solvency of KTRS.

Since 2008, given finite revenue and challenging budgets, the state has been unable to pay the full annual required contribution for teachers’ pensions. Current retirees are being paid by liquidating investments that ideally would be held onto to grow and pay future retirees. In fact, more than $1 of every $3 paid in pension benefits to retired teachers comes from selling the fund’s assets — something that wasn’t necessary less than a decade ago.

KTRS’ actuary projects that, without required contributions, the retirement fund will exhaust all assets by 2036. As of June 30, 2014, on an actuarial funding basis, KTRS reported assets of $16.2 billion to pay total liabilities of $30.2 billion, leaving the fund with 53.6 percent of the assets needed to pay liabilities.

At the first meeting on July 17, Lt. Gov. Crit Luallen told members that no easy options exist, but the fund must be stabilized. The issue impacts every Kentuckian — not just members of the teachers’ plan — because the state’s bond rating will be hurt if a long-term solution isn’t found.

House Bill 4 When the 2015 Session of the General Assembly adjourned during the early morning hours of Wednesday, March 25th, House Bill 4 was one of bills that had not passed. House Bill 4, in its original version without amendment, would have provided a long-term funding plan for the Teachers’ Pension Fund. Part of this plan included the issuance of a bond of up to $3.3 billion at today’s historically low interest rates. This bond would have made it possible for the Commonwealth to slowly phase in, over an eight-year period, to the full additional funding needed by the pension fund. Therefore, the plan was not just a short-term fix, it provided a long-term solution.

Although House Bill 4 did not pass this session, the funding plan it proposed will likely remain viable, although potentially more expensive if interest rates rise, when the General Assembly convenes again in January for the 2016 session. A lot of progress was made from last year’s 2014 session, during which the funding plan seemed to attract only isolated interest, to 2015 when the plan became actual legislation and passed out the one of the legislative chambers. Furthermore, the upcoming 2016 session is a budget session when the focus will be even keener on the KTRS pension fund’s needs.

Between now and the start of the next session, KTRS will continue to discuss the funding issue with members of the General Assembly and their staff, as well answering any other questions that they may have regarding the retirement system. KTRS is optimistic that something will be done in 2016 as the pension funding issue needs to be addressed now and all parties are aware that the longer that funding is unavailable the more difficult this issue is to address.

Wednesday, March 11, 2015

House Bill 4

On March 9th, a Senate Committee Substitute to House Bill 4 was approved by the Senate State and Local Government Committee. The Senate Committee Substitute replaces the original language of House Bill 4 with language creating a task force that would study and develop recommendations on funding and benefits regarding KTRS. The task force’s findings and recommendations are to be submitted to the Legislative Research Commission for referral to a legislative committee by December 18, 2015. The task force would be comprised of six members of the House of Representatives and six members of the Senate. On March 10th, House Bill 4 as amended by the Senate Committee Substitute passed out of the Senate by a vote of 26-10. House Bill 4 as amended will now be sent to the House of Representatives for that chamber’s concurrence. If the House of Representatives does not concur, the bill could be assigned to a conference committee where members of both chambers could meet and discuss whether any compromise may be reached.

Monday, February 23, 2015

House Bill 4

On Monday, February 23, 2015, House Bill 4, the bill that would provide a long-term funding plan for the Teachers’ Pension Fund, passed out of the Kentucky House of Representatives by a vote of 62-31. It has now been received in the Senate for consideration by that Chamber. The bill would ensure the retirement security of the Commonwealth's teachers by providing a statutory schedule for phasing into full funding needed by the pension fund. The funding plan would include an immediate infusion into the pension fund of up to $3.3 billion from a bond issued by the Commonwealth. The bond would help stabilize the pension fund, thus making the phase-in toward full funding possible. The current, historically low interest rates provide a window of opportunity for this long-term funding plan to be implemented.

On Tuesday, February 10, 2015, House Speaker Greg Stumbo, sponsor of House Bill 4, presented the bill to the House Appropriations and Revenue Committee. The House budget committee then voted to fund the $3.3 billion Bond which would shore up the Kentucky Teachers’ Retirement System. The House Appropriations and Revenue Committee voted in favor of stabilizing the teachers’ retirement system without any negative votes.